It’s increasingly unlikely that Mayor Richard Bissen’s plan to convert more than 7,000 short-term rentals into long-term housing on Maui will be implemented this year.

As proposed, the exemptions that allow many apartment-zoned units on the island to operate as vacation rentals would expire July 1 for 2,200 units in West Maui, and on Jan. 1 for the remaining 5,000 such units, mostly located in South Maui.

But that can’t happen without approval by the Maui County Council, which has yet to take the matter up for a vote.

Bissen put his bold plan forward last May, in large part responding to the need to quickly create additional housing for some of the 12,000 people displaced by the August 2023 wildfires but also to increase inventory on an island with a longstanding housing crisis.

The county’s planning commission vetted the proposal last summer, hearing hours of passionate public testimony. The Maui Planning Commission made modest tweaks while preserving the quick implementation timeline — convert first round of rentals to long-term housing July 1, 2025, then the rest Jan. 1, 2026 — before sending it on to the council in July.

Eight months later, the council has yet to even put the bill on its agenda as members hold out for more studies on how it could affect the heavily tourism-dependent local economy.

The mayor’s proposed $1.51 billion budget for the fiscal year starting July 1, which the council is set to start reviewing Monday, does not appear to account for the significant reduction in tax revenue that economists and others have said would result from such a sudden and dramatic decrease in short-term rentals.

County Council Chair Alice Lee said she knows the best-case scenario for Maui residents would be for the council to discuss and vote on the mayor’s proposal as soon as possible, but first she wants to see more information about the potential impact of quickly converting almost half of the county’s vacation properties into long-term housing.

“We need to know what our revenues are going to be,” Lee said, adding that her colleagues are concerned about disrupting the budget process.

The affected properties are known as the Minatoya list, named after former county attorney Richard Minatoya, whose 2001 legal opinion allowed thousands of condos and other apartment-zoned units to operate as vacation rentals.

Study Delayed

Efforts to move the mayor’s proposal forward have faced obstacles in the past year. 

The council has prioritized understanding as much as possible about how the plan could affect the local economy and housing availability before bringing the issue to a vote, Lee said.

A 2021 white paper by Hawaiʻi economist Paul Brewbaker, revised in late 2022, found the hypothetical impacts of eliminating 7,000 short-term rentals would include losing 14,000 jobs and $137 million in tax revenue.

Last year, the council budgeted $300,000 to study the plan’s potential impact in greater detail. Members expected an outside group would be able to complete a report for them to review by early 2025.

“It’s highly unusual for anyone to make such a sweeping proposal without anyone having done some sort of study first,” Lee said. “So that was the first thing the council was working on — getting more objective information.”

However, a report never materialized because the county and the contractor were unable to agree on a contract, she said. 

The council has since assigned a staff member to compile as much unbiased information as possible, and they have been considering searching for another outside group to study the possible impact. But that research and those discussions are currently on hold while they shift their attention toward the budget process, Lee said.

“I’m not going to let this prolong the process to an unreasonable degree,” Lee said. “If we find out it’s going to take too long to find an independent contractor, we will just go with what we have. I think we owe it to the public that we make a decision as quickly as possible.”

Increasing Housing

Even though Lee and the rest of the council were intent on remaining objective while they wait for additional information, Lee said she was also critical of the potential benefits of phasing out nearly half of the county’s short-term rental units.

“I believe that there may not be the result the mayor and others are expecting in terms of freeing up a lot of condominium units, whether it be for rent or sale,” she said, adding that she was also concerned about a decline in tourism and fewer jobs related to the upkeep of vacation rentals.

Bissen has acknowledged that there would likely be some negative economic effects, but he has remained adamant that the positive impact would far outweigh the negative. The housing stock would be flooded with new units, he has said, lowering housing costs and providing locals with much-needed relief from the housing shortage.

It’s “simple economics,” he said in a statement Friday. “More supply, less demand, lower prices.”

Only about 8% of affected property owners, according to the Bissen administration, are Maui County residents, and the high concentration of vacation rentals on Maui in general “has reduced housing availability, driven up property values, and priced local families out of homeownership,” the mayor said. “We can no longer prioritize offshore investments over the well-being of our residents.”

Data indicates hotels would be able to accommodate many visitors who would have otherwise stayed in vacation rentals, he said, and many of the potentially lost jobs are transferable to “other, more sustainable sectors in Maui’s diverse economy.”

Various community groups, including the nonprofit Lahaina Strong, have publicly supported the change.

Phasing out such a large number of short-term rentals would certainly have a notable impact on the local economy and housing availability, according to research published by the University of Hawaiʻi Economic Research Organization in June.

If all of the 6,172 units on the Minatoya list that were operating as short-term rentals were converted into long-term units, Maui’s residential housing stock would increase by about 13%, according to the research.

“This would be an unprecedented increase in housing supply,” said Justin Tyndall, one of the study’s authors.

Such a sharp increase in the number of residential units would meaningfully improve the county’s housing and affordability crisis, which has been exacerbated by wildfires, the high cost of building and Maui’s reluctance to approve new residential development, he said.

“Maui is probably the most difficult place to build housing of just about any place in America,” he said. “The little bit of new supply Maui has built in the last five years has been completely offset by units being converted into vacation rentals.”

While the mayor’s proposal would certainly free up a lot of much-needed residential housing, he said, it would “come at the cost of the tourism industry” and trigger a substantial loss of property tax revenue for the county. Implementing this policy change without also taking steps to diversify the local economy and identify alternative revenue sources could ultimately result in reduced county services, higher taxes or a weakened labor market. 

At a community meeting in Kīhei earlier this month, Bissen addressed the controversy surrounding what has become one of the most talked-about policies of his administration.

“It’s divided the community and that wasn’t the intention,” he said.

Still, he said he believes his proposal remains the county’s best option for quickly improving housing options for residents.

“How strange is it that we have more housing for visitors than the people who live here?” he asked the crowd, which appeared largely supportive. “This wasn’t a knee-jerk reaction. It’s something that should have been done a long time ago.”

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.

“Hawaiʻi’s Changing Economy” is supported by a grant from the Hawaiʻi Community Foundation as part of its CHANGE Framework project.